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ReneSola Ltd. (ADR) Earnings: Will Profits Get Their Day in the Sun?

Solar stocks have bounced back a bit lately. Can ReneSola keep up the pace?

On Thursday, ReneSola (NYSE:SOL) will release its quarterly report, and shareholders hope that the Chinese solar company can enjoy some of the same success that Trina Solar (NYSE:TSL) has had while avoiding some of the concerns that have plagued JinkoSolar (NYSE:JKS) in its quarterly report recently. Overall, solar stocks have given back a lot of ground in 2014 after a strong performance last year, and ReneSola needs to demonstrate that it deserves a spot among the survivors of the Chinese solar shakeout.

ReneSola, JinkoSolar, and Trina Solar are just a few of the many players in the crowded Chinese solar industry. Until recently, falling prices and gluts of solar modules made it difficult for solar players even to post positive gross profit margins, let alone profitable net margins. Yet now, Trina Solar and JinkoSolar have started posting profits, while investors still expect ReneSola to lose money this quarter. Will ReneSola ever catch up? Let's take an early look at what's been happening with ReneSola over the past quarter and what we're likely to see in its report.

Micro Replus 250 micro-inverter. Source: ReneSola.

Stats on ReneSola

Analyst EPS Estimate

($0.08)

Year-Ago EPS

($0.45)

Revenue Estimate

$425.54 million

Change From Year-Ago Revenue

50%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

What's next for ReneSola earnings? In recent months, analysts have gotten more optimistic about ReneSola earnings, narrowing their first-quarter loss estimates by a nickel per share and now calling for profits for the full 2014 and 2015 years. The stock, though, has fallen sharply by 22% since late February.

ReneSola's fourth-quarter results looked reasonably strong, with the company taking advantage of the same positive trends that JinkoSolar, Trina Solar, and other industry players have used to become profitable. For its part, ReneSola made a modest profit, reversing year-earlier losses and projecting that its module shipments would soar between 30% and 45% in 2014. The results were good enough to lead analysts to upgrade the stock, citing cheap valuations as being worth the risk inherent in the solar space.

But the problem that ReneSola has faced lately is the temporary end of the gold rush of speculation in solar stocks. As part of a broader momentum-based rally, solar stocks were among the favorites for investors looking for high-growth investment opportunities. Moreover, Chinese solar stocks in particular had been left for dead, making them great speculative plays for those willing to take on the substantial risk involved. But when the momentum movement took a break from the stock market, ReneSola and its solar peers were among those that took the most damage.

Of even more concern was ReneSola's March decision to stop making shipments of certain products to the U.S. market. The move came as a response to investigations from the Commerce Department over alleged dumping of photovoltaic products from Chinese manufacturers, and ReneSola said it would voluntarily choose to cease the shipping of such products in order to avoid any appearance of impropriety during the period of the investigation. The U.S. represents between a quarter and a third of ReneSola's overall sales, making the hiccup a potential landmine for short-term revenue.

More recently, though, positive results from Trina Solar were enough to lift ReneSola in concert, as most investors have started lumping many of the Chinese solar stocks together. In addition, ReneSola is reportedly trying to end its trade worries with the U.S., and although there are no assurances that its efforts will be successful, they nevertheless mark a solid opportunity for ReneSola to put issues behind it and keep moving forward.

In the ReneSola earnings report, look closely at module shipments and gross profits to see how well the company has done in its recovery. It's important for ReneSola to keep up with the more successful of its Chinese solar peers if it wants to count itself among the industry's long-run survivors.

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Author

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
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